Growth Stocks
Although growth stock picks can be highly volatile, they can make good long-term investments. They may be well-known stars or quiet gems, but they do share one common attribute—they are growing at a higher-than-average rate within their industry, or within the market as a whole, and could keep growing for years or decades.
And keep in mind that we focus on growth stocks, which have a good long-term history and favourable prospects. We downplay momentum stocks that tend to attract many investors simply because they are moving faster than the market averages, but are liable to fall sharply when their momentum fades.
There’s room for growth stock investing in your portfolio, but make sure you follow our TSI Network three-part Successful Investor strategy for your overall portfolio:
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
Make better stock picks when you read this FREE Special Report, Canadian Growth Stocks: WestJet Stock, RioCan Stock and More.
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NEWMONT MINING CORP. $55 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 496.2 million; Market cap: $27.3 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.5%; TSINetwork Rating: Average; www.newmont.com) is the world’s second-largest gold miner by production, behind Barrick Gold Corp. (New York symbol ABX). The company has major mines in the U.S., Australia and Peru. It gets about 90% of its revenue from gold. The remaining 10% comes from copper, zinc and other metals.
Newmont sells its gold at the market rate instead of through hedging contracts that lock in prices. This policy has helped it take full advantage of rising gold: its average realized gold price jumped 124.1%, from $697 an ounce in 2007 to $1,562 in 2011.
Lack of hedges unleashed earnings
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Newmont sells its gold at the market rate instead of through hedging contracts that lock in prices. This policy has helped it take full advantage of rising gold: its average realized gold price jumped 124.1%, from $697 an ounce in 2007 to $1,562 in 2011.
Lack of hedges unleashed earnings
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ADOBE SYSTEMS INC. $33 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 491.8 million; Market cap: $16.2 billion; Price-to-sales ratio: 3.7; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) reported that its revenue rose 6.6% in the three months ended August 31, 2012, to $1.08 billion from $1.01 billion a year earlier.
The company is doing a good job of selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription service instead of a one-time purchase. Subscription revenue jumped 50.9% in the quarter, and now accounts for 16% of its overall revenue, up from 11% a year earlier. Adobe still gets 75% of its revenue from direct software sales. The remaining 9% comes from services and support.
Earnings rose 6.7%, to $291.2 million from $272.8 million. Earnings per share rose 5.5%, to $0.58 from $0.55, on more shares outstanding. These figures exclude several unusual items, such as restructuring charges and gains on investment sales.
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The company is doing a good job of selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription service instead of a one-time purchase. Subscription revenue jumped 50.9% in the quarter, and now accounts for 16% of its overall revenue, up from 11% a year earlier. Adobe still gets 75% of its revenue from direct software sales. The remaining 9% comes from services and support.
Earnings rose 6.7%, to $291.2 million from $272.8 million. Earnings per share rose 5.5%, to $0.58 from $0.55, on more shares outstanding. These figures exclude several unusual items, such as restructuring charges and gains on investment sales.
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EBAY INC. $48 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $62.4 billion; Price-to-sales ratio: 4.8; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) launched its online auction site in September 1995. It now has 104.8 million users worldwide. The company charges users fees to list and sell their goods through its websites.
On top of used goods, the company is also selling more merchandise from retailers. That’s helping it compete with Amazon.com. Right now, sales of new items at fixed prices account for over 60% of eBay’s total transactions.
The company also operates several other highly popular websites, including StubHub (live event ticket sales), Shopping.com (comparison shopping) and Rent.com (apartment and house rentals). In addition, it has local websites that sell classified advertising in over 1,000 cities. In all, eBay’s websites provide 54% of its revenue.
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On top of used goods, the company is also selling more merchandise from retailers. That’s helping it compete with Amazon.com. Right now, sales of new items at fixed prices account for over 60% of eBay’s total transactions.
The company also operates several other highly popular websites, including StubHub (live event ticket sales), Shopping.com (comparison shopping) and Rent.com (apartment and house rentals). In addition, it has local websites that sell classified advertising in over 1,000 cities. In all, eBay’s websites provide 54% of its revenue.
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VERIZON COMMUNICATIONS INC. $46 (New York symbol VZ, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $133.4 billion; Price-to-sales ratio: 1.2; Dividend yield: 4.5%; TSINetwork Rating: Average; www.verizon.com) is close to completing its $3.9- billion purchase of wireless spectrum from a group of cable companies. This will help Verizon profit from rising wireless data use: the Federal Communications Commission estimates mobile data demand will be 25 to 50 times greater by 2015 than it was in 2010.
The company also increased its quarterly dividend by 3.0%, to $0.515 a share from $0.50. The new annual rate of $2.06 yields 4.5%.
Verizon is a buy.
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The company also increased its quarterly dividend by 3.0%, to $0.515 a share from $0.50. The new annual rate of $2.06 yields 4.5%.
Verizon is a buy.
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TEXAS INSTRUMENTS INC. $28 (Nasdaq symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $30.8 billion; Priceto- sales ratio: 2.4; Dividend yield: 3.0%; TSINetwork Rating: Average; www.ti.com) is selling more chips to tablet computer makers. However, its sales to smartphone manufacturers are declining. That’s because these clients are making more of their own chips instead of relying on outside suppliers.
Even so, Texas Instruments continues to do a good job of controlling its costs. That let the company raise its quarterly dividend by 23.5%, to $0.21 a share from $0.17. The new annual rate of $0.84 yields 3.0%.
Texas Instruments is a buy.
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Even so, Texas Instruments continues to do a good job of controlling its costs. That let the company raise its quarterly dividend by 23.5%, to $0.21 a share from $0.17. The new annual rate of $0.84 yields 3.0%.
Texas Instruments is a buy.
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TERADATA CORP. $73 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 168.6 million; Market cap: $12.3 billion; Price-to-sales ratio: 4.9; No dividends paid; TSINetwork Rating: Average; ww.teradata.com) continues to see strong demand for its analytics services, which help businesses gather and analyze large amounts of data, including customer purchasing patterns. The company’s revenue rose 14.5% in the three months ended June 30, 2012, to $665 million from $581 million a year earlier. Earnings per share rose 28.3%, to $0.77 from $0.60.
However, the company is facing stronger competition from bigger companies like IBM and Oracle. That could force it to lower its prices, which would hurt its profit margins.
Teradata is a hold.
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However, the company is facing stronger competition from bigger companies like IBM and Oracle. That could force it to lower its prices, which would hurt its profit margins.
Teradata is a hold.
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SHERWIN-WILLIAMS CO. $146 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 102.6 million; Market cap: $15.0 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.1%; TSINetwork Rating: Above Average; www. sherwin-williams.com) earned $227.8 million in the quarter ended June 30, 2012, up 27.2% from $179.1 million a year earlier. Earnings per share rose 30.7%, to $2.17 from $1.66, on fewer shares outstanding. Sales rose 9.3%, to $2.6 billion from $2.4 billion.
Demand for the company’s paints has moved up as the U.S. housing market continues to recover. That’s making it easier for Sherwin to increase its prices to cover its rising raw material costs (the company uses oil to make its paint). However, the stock has gained 92% in the past year, and now trades at a high 22.9 times Sherwin’s projected 2012 earnings of $6.38 a share.
Sherwin-Williams is a hold.
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Demand for the company’s paints has moved up as the U.S. housing market continues to recover. That’s making it easier for Sherwin to increase its prices to cover its rising raw material costs (the company uses oil to make its paint). However, the stock has gained 92% in the past year, and now trades at a high 22.9 times Sherwin’s projected 2012 earnings of $6.38 a share.
Sherwin-Williams is a hold.
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DIEBOLD INC. $33 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 63.2 million; Market cap: $2.1 billion; Price-to-sales ratio: 0.7; Dividend yield: 3.4%; TSINetwork Rating: Average; www.diebold.com) makes ATMs, safes, vaults and building security systems.
In the three months ended June 30, 2012, the company’s earnings rose 30.7%, to $26.5 million from $20.3 million a year earlier. Earnings per share rose 32.3%, to $0.41 from $0.31, on fewer shares outstanding. If you exclude unusual items, such as a writedown of obsolete computer software, Diebold’s earnings per share would have risen 11.4%, to $0.49 from $0.44.
Revenue rose 12.2%, to $743.2 million from $662.4 million. That’s mainly because the company continues to see strong demand for ATMs from banks in North and South America. That’s helping it offset weaker sales in Europe. Sales in Asia were flat.
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In the three months ended June 30, 2012, the company’s earnings rose 30.7%, to $26.5 million from $20.3 million a year earlier. Earnings per share rose 32.3%, to $0.41 from $0.31, on fewer shares outstanding. If you exclude unusual items, such as a writedown of obsolete computer software, Diebold’s earnings per share would have risen 11.4%, to $0.49 from $0.44.
Revenue rose 12.2%, to $743.2 million from $662.4 million. That’s mainly because the company continues to see strong demand for ATMs from banks in North and South America. That’s helping it offset weaker sales in Europe. Sales in Asia were flat.
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NCR CORP. $23 (New York symbol NCR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.1 million; Market cap: $3.7 billion; Price-to-sales ratio: 0.6; No dividends paid; TSINetwork Rating: Average; www.ncr.com) is a leading maker of ATMs, checkout scanners, cash registers and self-serve kiosks.
NCR is benefiting from its $1.2-billion purchase of Radiant Systems Inc. in August 2011. Radiant makes point-of-sale terminals and self-serve kiosks for hotels, restaurants and gas stations. NCR also sold its struggling DVD-rental kiosk business for $100 million. These moves pushed up NCR’s revenue by 10.8% in the second quarter of 2012, to $1.4 billion from $1.3 billion a year earlier. Earnings jumped 48.9%, to $67 million, or $0.41 a share, from $45 million, or $0.28.
The stock is up nearly 40% since the start of 2012. Even so, it trades at just 9.4 times the $2.46 a share that NCR will probably earn in 2012.
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NCR is benefiting from its $1.2-billion purchase of Radiant Systems Inc. in August 2011. Radiant makes point-of-sale terminals and self-serve kiosks for hotels, restaurants and gas stations. NCR also sold its struggling DVD-rental kiosk business for $100 million. These moves pushed up NCR’s revenue by 10.8% in the second quarter of 2012, to $1.4 billion from $1.3 billion a year earlier. Earnings jumped 48.9%, to $67 million, or $0.41 a share, from $45 million, or $0.28.
The stock is up nearly 40% since the start of 2012. Even so, it trades at just 9.4 times the $2.46 a share that NCR will probably earn in 2012.
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CEDAR FAIR L.P. $33 (New York symbol FUN; Income Portfolio, Consumer sector; Units outstanding: 55.5 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.8%; TSINetwork Rating: Average; www.cedarfair.com) reported revenue of $881 million from the beginning of the year through the Labour Day holiday weekend. That’s up 4.8%, from the same period in 2011.
New rides and attractions are helping Cedar Fair draw more visitors to its 11 amusement parks and seven water parks. Overall attendance rose 1%, while average spending per guest gained 4%. The partnership still plans to raise its annual distribution rate from $1.60 a unit (4.8% yield) in 2012 to $2.00 (6.1% yield) in 2013.
Cedar Fair is a buy.
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New rides and attractions are helping Cedar Fair draw more visitors to its 11 amusement parks and seven water parks. Overall attendance rose 1%, while average spending per guest gained 4%. The partnership still plans to raise its annual distribution rate from $1.60 a unit (4.8% yield) in 2012 to $2.00 (6.1% yield) in 2013.
Cedar Fair is a buy.
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